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In: Economics

The manager of the bank where you work tells you that your bank has $5 million...

The manager of the bank where you work tells you that your bank has $5 million in excess reserves. She also tells you that the bank has $300 million in deposits, $50 million in government bonds, and $200 million in loans. Show your bank’s T-account. What is the required reserve ratio? What is the money supply multiplier? Suppose a customer withdraws $10 million. Show your bank’s new T-account. Does your bank now still meet the minimum reserve requirement? If not, what should be done to resolve the issue? What will happen to the supply of money? by what amount?

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Rahul Sunny answered 8 months ago
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